Analysis of Global Business Kraul Corporation has major operating divisions located outside the United States. Your boss, the manager of international operations, has asked you to analyze the recent performance of the two divisions.

I. Selected income statement data for the divisions for 2000 and 2001, stated in U.S. dollars, are as follows:

Required:

a. Calculate the gross margin and gross margin percentage for the two divisions for 2000 and 2001. On the basis of this information, which division has had the better overall performance? Which had the greater improvement? Explain.

b. Calculate the net income margin for the two divisions for 2000 and 2001. Which division had the better overall performance? Which had the greater improvement?
Explain.

c. What other types of information would you take into consideration in evaluating the operating performance of the divisions?

d. To which division manager would you award the greater bonus for 2001? Explain why.
II. When you deliver your analysis of Divisions A and B to your manager, she asks you to look at the amount the company has invested in assets assigned to each of the divisions.
You go back to the accounting department and receive the following information:

Required:

a. Calculate the return on assets for each division for 2000 and 2001.

b. Which of the divisions has had the better overall performance? Which had the greater improvement? Explain.

c. Based on the information you developed relating to return on assets, to which division manager would you award the greater bonus for 2001? Explain why.

d. What other considerations might be relevant given that the divisions are located outside the United States?

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2000 2001 Division A Sales $500,000 $800,000 Cost of goods sold 300,000 400,000 Net income 50,000 60,000 Division B Sales 700,000 800,000 Cost of goods sold 560,000 680,000 Net income 60.000 88,000